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Calif. regulators order PG&E to quit refusing bioenergy facility contracts

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Essential Energy Insights - January 2021


Calif. regulators order PG&E to quit refusing bioenergy facility contracts

California regulators ordered utilities in the state to continue executing bioenergy contracts aimed at addressing the wildfire hazards posed by millions of dead trees and scolded Pacific Gas and Electric Co. for balking at signing such contracts.

Pursuant to a proclamation signed by Governor Jerry Brown in 2015, the Public Utilities Commission in early 2016 directed the PG&E Corp. subsidiary and other utilities to solicit contracts for power generators to use biofuel from high hazard wildfire zones. With bark beetles killing off millions of trees, the utilities were directed to have the dead wood burned at biomass electricity generating plants. However, some of those plants have closed due to a lack of business.

Meanwhile, PG&E is facing extensive scrutiny and litigation over damage claims stemming from October 2017 wildfires in California's wine country.

In their most recent move (Resolution E-4922), the commissioners ordered continuation of the Bioenergy Market Adjusting Tariff, or BioMAT, program the agency established two years ago, noting that total potential BioMAT program costs are between $232 million per year and $344 million per year.

Moreover, Commissioner Clifford Rechtschaffen during the agency's March 22 meeting took PG&E to task, saying, "I am troubled and really disappointed by the actions of PG&E in dealing with this program, in delaying execution of the BioMAT contracts, and in particular some of its recent statements, including on its web page and in the ex parte communications with our office, that PG&E indicated that it would not comply with the resolution."

The resolution directs the utilities to move forward with the BioMAT program and execute contracts in accordance with the PUC's prior resolution. Rechtschaffen said PG&E objected to the legality of the contracts because of litigation involving the commission's renewable energy feed-in tariff program for solar projects.

But no court has issued a decision dealing with the legality of the BioMAT proceeding, Rechtschaffen continued. "Until and unless a court declares this BioMAT program unlawful, it's not up to a utility like PG&E to determine that it will not comply with our orders," he said.

Further, the commissioner accused PG&E of frustrating local governments, other state agencies and developers that have spent years in the planning, permitting and financing of projects. Some of them have received grants from state departments and agencies such as the California Energy Commission and state Department of Forestry and Fire Protection, he said. Those grants may be canceled and refunds may have to be made because of this delay, Rechtschaffen said.

Commissioner Carla Peterman said the BioMAT program is focused on reducing wildfire risk. "Now, more than ever, given the intensity and propensity of wildfires, we need to be thinking about solutions to help deal with forest waste, and this program is focused on doing that," Peterman said.

Peterman said PG&E has the majority of the contracts and the PUC will be monitoring the company's compliance.

In the resolution, the PUC discussed the impact of the U.S. District Court for the Northern District of California's December 2017 order in Winding Creek Solar LLC v. Peevey, which found that the PUC's Renewable Market-Adusting Tariff program violated the federal Public Utility Regulatory Policies Act. PG&E and Sempra Energy subsidiary San Diego Gas & Electric Co. said the decision raised legal questions about the BioMAT program, but Edison International subsidiary Southern California Edison Co. said the court did not address the bioenergy program, though the decision eventually may have implications for it.

The PUC said PG&E still has 11 power purchase agreements from earlier BioMAT program periods to prepare for execution. The commission ordered the three utilities to accept new applications and execute contracts. It gave the utilities 30 days to execute contracts with developers that already have accepted the offered price of the standard contracts.

The Bioenergy Association of California urged the commission to enforce its orders by subjecting the utilities to penalties for noncompliance.

In response to the commissioners' action, PG&E said it currently is examining the decision and is reviewing its options.